I Squared to acquire IC Power

27 November 2017 - 12:00 am UTC

I Squared Capital has reached an agreement with Kenon Holdings to acquire Inkia Energy, a wholly owned subsidiary of IC power.

The purchase prices will be up to USD 1.227bn, according to a statement by Kenon Holdings. 

Inframation previously reported that I Squared Capital was nearing the acquisition of the asset from Singapore and Israel-based Kenon holdings for an enterprise value of more than USD 3.5bn. The asset has a capacity of 3.49GW.

As part of the transaction, the buyer will assume Inkia’s USD 450m of bonds issued on 9 November in a refinancing of unsecured notes for the same amount of debt, associated with the portfolio. The proceeds of the notes, which have a 10-year term and a price of 5.875%, will be used to purchase or redeem all of the outstanding Inkia notes due 2021.

“This transaction reinforces I Squared Capital‘s commitment to infrastructure in Latin America,” Adil Rahmathulla, partner at I Squared, said in a press release. “The Inkia portfolio comes with a highly seasoned and successful development team as well as a robust pipeline of renewable and natural gas generation projects.”

Credit Suisse acted as financial advisor to ISQ and Norton Rose Fulbright as legal adviser to ISQ. Bank of America Merrill Lynch acted as a financial advisor to the seller.

The bid of the other prospective buyer, Chilean utility and distribution company, Colbún, did not advance after it offered to purchase only the Chilean and Peruvian assets. 

ISQ secured commitments of more than USD 4bn for its ISQ Global Infrastructure Fund II, which held a first close on 26 October.

IC Power’s Peruvian and Chilean holdings represent 2.45GW of the group’s 3.49GW portfolio, comprising 16 assets in 10 Latin American countries (see chart below). IC Power’s Israeli asset, OPC Energy, is not included in this transaction.

The Peruvian assets total 64% of IC Power’s Latin American portfolio by capacity, while the Peruvian and Chilean assets combined account for 70%.

The three largest assets have a combined EBITDA of USD 189m. According to Inframation calculations based on Kenon Holdings’ 2016 financial statement, the transaction will have an EV/EBITDA multiple of 12x.

Figure 1: IC Power Latin American Power Portfolio
Asset MW Location Generation type Ownership Interest Adjusted EBITDA Outstanding Debt Net Debt
Corinto 71 Nicaragua HFO 65% 28 88 79
Tipitapa Power 51 65%
Amayo I & II 63 Wind 61%
Puerto Quetzal 179 Guatemala HFO 100% 5 18 13
Nejapa 140 El Salvador 100% 12 4 3
Kanan 92 Panama 100% 11 46 44
Pedregal 54 21%
JPPC 60 Jamaica 100% 4 1 -2
CEPP 67 Dominican Republic 97% 3 1 9
Supertroil 31 Colombia Natural Gas  60% 2 1
Colmito 58 Chile Natural Gas and diesel 100% 3 17 16
Central Cordones 153 Diesel 87% 9 35 32
Kallpa 1063 Peru Natural Gas 75% 139 414 393
Samay I 632 Diesel and Natural Gas 75% 19 339 321
CDA 545 Hydroelectric 75% 31 593 556
COBEE  228 Bolivia Hydroelectric + Natural Gas 100% 20 88 51
Total: 3487     Total: 284 1646 1516
Source: Kenon Holdings FY Ending 31 Dec. 2016